RUTH SUNDERLAND: It's time to give a voice to small investors and reward them, not fat cat managers of companies

To say the financial crisis created a large scale loss of trust in the system is now commonplace. But in ordinary savers and investors it also created a dangerous sense of alienation from their money.

Faced with Libor and forex fixing, excessive pay, corporate tax avoidance and predatory takeovers, the average person feels simply an impotent spectator, even though their savings and investments are at stake.

Mark Carney, governor of the Bank of England, has been sufficiently concerned about this erosion of trust that he has spelt out the Old Lady’s purpose explicitly in a new mission statement.

Change: Mark Carney, governor of the Bank of England, has been sufficiently concerned about the erosion of trust

His manifesto of ‘promoting the good of the people of the United Kingdom by maintaining monetary and financial stability’ is important because it clearly states not only what the Bank does, but why, and for whom.

Making plain that the Bank is there to serve the people of this country should remind the financial sector that its purpose is not to act as a bonus-generating machine, but to be socially useful and serve customers.

Carney’s manifesto attempts to bridge the gap between the inner circle of decision-makers and power-brokers and the rest of us.

A similar divide exists on stock markets, between the investing institutions and the managers of leading companies, and small investors and pension savers.

Perversely, the system is far less rewarding for the providers of capital – the savers and investors – than for the managers of companies or for the pension funds and investment managers who act as their agents.

That is not how democratic or ethical capitalism is meant to work.

As pension-holders, most people are profoundly disengaged because they have little knowledge or control over what happens to their money once it enters the system.

They do not even have an automatic right to be informed which shares their fund holds.

Contrast this with our attitudes as homeowners, where most of us keep an eagle eye on values and invest in maintenance and improvements.

Mobilising the small shareholder, whether they invest in companies directly, or indirectly through a fund or pension scheme, is the missing link in ethical capitalism.

It is hard to see how we can have integrity in business or on stock markets without accountability to the owners.

Small shareholders are not necessarily powerless. In the US there is a tradition of class actions that can be highly effective in pursuing companies through the courts.

We have begun to see similar cases here, with the Royal Bank of Scotland Shareholder Action Group claiming £4billion in damages for losses in the bank’s 2008 rights issue.

The Coalition sees it as up to shareholders to ensure companies behave responsibly. But politicians tend to mean the large institutions, which are at least one remove from their members and take little or no account of their views.

At the same time, Government is encouraging individuals to take charge of their future by saving in pensions. With that responsibility should come the right to a voice.

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Pension funds may delegate their votes on pay and other matters to an asset manager, or they may seek to keep control of their own voting rights. Either way, institutions make voting decisions unilaterally, without consulting the savers who have entrusted cash to their care.

This is an outmoded and opaque system that flies in the face of shareholder democracy. The traditional objections to involving members are that it is too expensive to communicate with them, their views are incoherent and contradictory, and that they are not interested anyway.

Social media could surmount these problems. Pension funds could communicate with members through blogs and on Twitter and they could conduct online surveys to test opinion on executive pay or takeovers.

Auto-enrolment players, including Nest, are already heading in this direction. If there were a will in other schemes to give members a say, a way could be found.

Banks are the most notorious example of the damaging consequences of the ownership gap.

But in other industries it has also produced behaviour that has hurt the UK economy: short-termism, under-investment and executives who focus on financial engineering and pursue mergers and takeovers to maximise short-term financial returns.

Decisions taken by corporate executives and by institutional investors shape our society.

Small shareholders, most of whom are not rich enough to be insulated from the social consequences of corporate greed, could help ensure these are made for the long-term benefit of the UK economy.